South Korea's financial regulator on Thursday unveiled a set of measures to help enhance the competitiveness of savings banks that include easing regulations on mergers and acquisitions, and adopting relatively lax loan classification rules.
The Financial Services Commission said it will set up an over 1 trillion-won ($689 million) fund to help savings banks take soured loans off their balance sheets and launch a special vehicle to manage non-performing loans extended by savings banks.
The regulator also said it will ease rules on M&As in the sector and review savings banks' loan classification rules, which they claim are too strict given their business environment.
Data showed that savings banks' assets have steadily grown, reaching 120.9 trillion won at the end of last year, up from 92 trillion won in 2020 and 86.9 trillion won in 2010.
But their lendings are largely focused on real estate development projects and low-rated, financially weak customers, leaving them vulnerable to economic cycles, and leading to a decline in profitability and worsening financial status.
In tandem with a rise in soured loans extended to real estate project financing, savings banks suffered a loss of 397 billion won in 2024 following a loss of 575 billion won the previous year. In 2022, they logged a combined 1.56 trillion-won net profit. (Yonhap)
